Iconic Brands Inc (OTCMKTS:ICNB) Consolidating Before Heading Higher

Iconic Brands Inc (OTCMKTS:ICNB) was featured last time in this piece, wherein we explained that long traders, who bought in the December run, were taking some profits at the moment, making the share price decline a bit. The share price found support at the $0.01 level. Additionally, the negotiations with debt holders, the work of the audit firms regarding the Q1 2017 report, and the annual report were noted, which we expected. In this new update, we will assess the reports, which were released recently, and we will check the company's news to explain the recent price action. Shareholders seem to be still accumulating shares. Have a look:SourceRecent DevelopmentsLet's start first with the financial figures, which market participants could find here. The most relevant items in the income statement (annually) are mentioned below. Note the large and positive net income that was reported thanks to a derivative liability:

• Sales: $300,889
• Gross profit: $123,221
• Net income: $3,049,078

We went to check how the company explains the net income. Here is the explanation:

"Accordingly, we recorded the $7,315,935 fair value of the embedded conversion features at December 31, 2016 as a derivative liability. The $3,171,712 decrease in the fair value of the derivative liability from $7,315,935 at December 31, 2016 to $4,144,223 at March 31, 2017 was credited to income from derivative liability." Source

What's our take? It is very good news that we don't think the market celebrated. It was written in a small text hidden in the annual report, and the market looks to have not priced it in. The release of the annual report was made on March 31, 2017, but the share price did not react to it.SourceLet's now review the press releases. In our opinion, the most relevant news was that the company finally obtained an agreement to convert over 80% of the company's debt. According to a recent press release that was put out on April 27, 2017, the company negotiated the terms of a previous deal with the debt holders:

"the Company negotiated a final conversion into a fixed number of shares totaling four hundred and eighty two million compared to what could have potentially been billions of shares, as well received concessions of close to one hundred and twenty five thousand dollars tendered by the note holders, and all interest has ceased." Source

The new deal will eliminate one million dollars in debt from the company’s balance sheet by issuing shares. However, if the company can grow its business, it will offset the dilution. Mr. Richard DeCicco explained:

"I am pleased to have reached a definitive and final agreement and compromise with the majority of our debt holders; it is their confidence in the longer-term value of Iconic Brands that allowed us to finalize this transaction and move forward. Corporately we have amazing developments forthcoming in the days, weeks and months ahead that I'm confident will add great value to our company." Source

We are expecting some news from the M&A consultants that the company hired in March and noted in a press release. This team may be looking for another company to acquire ICNB. If a buyer shows up, the market will push up the share price. In our opinion, now that the company has closed the negotiations with debt-holders, this scenario is even more likely. This is what the company said in the news:

"Additionally the company will be engaging a registered investment banking firm to advise on mergers, acquisitions and financing. The Company looks for this to be finalized over the next 2 weeks." Source

On the brand front, the most recent news shows that the company is growing. On May 26, 2017, it put out that the company was able to successfully ship to most markets during what qualified as off-season for Prosecco and the new brand launches in general. Additionally, on May 2, 2017, we got to know here that Earth Fare Markets’ chain of stores will be delivering the company's products. This means that the Bellissima Prosecco will be sold at 40 locations more in 11 states. What does it mean for the brand? It means that the revenue line will increase, and the share price should ultimately react by creeping up as more market participants learn about it. On the top of it, we also found out that the company closed an agreement with Buca Di Beppo. Thus, the brand commenced to be served in the restaurants from May 22nd. Mr. Richard DeCicco said the following:

"We're working around the clock expanding the brand. I will be making presentations to the LCBO in Toronto in early June, and I'm currently working with colleagues in the UK for entry into the marketplace, as well as negotiating with Asian distributors. These are exciting times for our company and our brand." Source

ConclusionICNB continues to positive steps as an emerging growth company. As expected, the company closed a deal with debt holders. Consequently, the financial risk of the firm was drastically reduced, making the company more attractive to potential suitors. If the company is acquired, the market will push up the shares. Additionally, the company is also growing organically. According to recent communications, the distribution chain is growing and revenues will as well. Finally, the last earnings report showed immense increase in the net income that we don't think the market celebrated. To sum up, there is a lot to like in the company, and it may surprise soon. We will be updating our subscribers as soon as we know more. For the latest updates on ICNB, sign up below!Disclosure: We have no position in ICNB and have not been compensated for this article.